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Customer Intimacy and Insights

想客户所想,为客户所需 Customer intimacy and insight ? Think and Act On Customer Insights ?

Have you encountered the latest business buzzword -- customer intimacy -- yet? Customer intimacy is the ability to satisfy your customers' needs, often even before they are aware of them. If you spend much time with an organization's marketing managers, it won't be long before the marketers start preaching about their desire to be intimate with the company's customers.

According to Fred Wiersema, author of Customer Intimacy (Knowledge Exchange, 1996), "Customer intimacy doesn't call for increasing customer satisfaction. It requires taking responsibility for customers' results. It doesn't impose arm's-length goodwill. It requires down-in-the-trenches solidarity, the exchange of useful information, and the cooperative pursuit of results."

Customer intimacy implies that you really know your customers and are able to anticipate their needs. Your customers are more than statistics derived from demographic analysis. To know your customers, you must be able to identify those factors that motivate each one to purchase your products. You must go beyond demographics to the more personal level of customer knowledge represented by their psychographics. Although demographics can provide a profile of facts that describes each customer, psychographics provide insights into what the customer values. For example, a cable TV company might collect data about its customers' hobbies or sports because a correlation may exist between TV program preferences and certain hobbies such as gardening, crafts, golf, and fishing.

To know your customer, you may need to go beyond the traits of that specific individual and organization. Customers' relationships with other parties (such as family members, employers, or the industry in which they compete) often motivate them to buy. For example, the current interest in "householding" exists because marketers believe that the people in a household represent a single unit of consumption. The decision to buy is influenced by all the household members, not just the person who actually makes the purchase. Your customers' relationships with others can also be a source of new customers; a bank, for example, may offer preferred rates on new personal credit cards to the employees of its corporate customers.

Getting to know your customers on such a personal level can be a costly and time-consuming effort. Why are some companies willing to make this type of investment?

The value of deepening existing relationships. The cost of acquiring a new customer is often two to three times the cost of enhancing an existing relationship with a satisfied customer. Understanding the parties that play an indirect role in a customer relationship can reap enormous rewards. These roles include the influencers of the purchasing decision, the actual user of the product and service, and the person who is the actual purchaser. A bank could perceive that the small portfolio held by a financial planning consultant is insignificant because it generates very little revenue directly. But if the bank tracks customer referrals, it knows how much of its business within its upscale consumer market exists because this consultant routinely recommends the bank to her clients. The bank may bestow preferred customer status on the consultant, not on the merit of the revenue stream directly from his or her customer portfolio, but because of the revenues he or she generates indirectly by influencing other, profitable customers.

Identification of the best customers. In a December 1997 study, the First Manhattan Consulting Group stated that "the top 15 to 20 percent of a bank's customers represents 130 to 200 percent of the bank's bottom line profitability." Consequently, your best customers are making up for the losses generated by your less stellar customers. You need to decide which customers you want to be intimate with. Most likely, the investment required to achieve customer intimacy can only be justified for these "best" customers and those who have a high probability of achieving the "best" status in the future.

The cost of defection. Frederick Reichheld claims in his March 1996 Harvard Business Review (HBR) article "Learning from Customer Defections" that "On average, the CEOs of the U.S. corporations lose half of their customers every five years. This fact shocks most people. It shocks the CEOs themselves, most of whom have little insight into the causes of the customer exodus, let alone the cures, because they don't measure customer defections, make little effort to prevent them, and fail to use defections as a guide to improvements." He goes on to state that "many companies aren't really alarmed by customer defections -- or they're alarmed too late -- because they don't understand the intimate, causal relationship between customer loyalty on the one hand and cash flow and profits on the other." In an earlier HBR article ("Zero Defections: Quality comes to Service," September 1990), Reichheld and his coauthor, W. Earl Sasser, wrote, "Customer defections have a surprisingly powerful impact on the bottom line. They can have more to do with a service company's profits than scale, market share, unit costs, and many other factors usually associated with competitive advantage. As customers' relationships with the company lengthen, profits rise. And not by just a little. Companies can boost profits by almost 100 percent by retaining just 5 percent more of their customers."

Given the benefits your company can derive from extending its relationship with its existing customers, you shouldn't be surprised if it initiates a customer intimacy program. You can expect to encounter a few stumbling blocks on the journey to achieving customer intimacy, however -- nothing major, just your information systems, business practices, and corporate values.

Information Systems

To be intimate with your customers, you must really know them. To know your customers, you must have access to quality information about them. One of the greatest issues an organization faces when it embarks on a customer intimacy program is the configuration of its application portfolio. Initially, most operational systems' primary objectives were to record enough of the details of a sale so that the requested product could be delivered, bills sent, and payments processed. Using the "divide and conquer" approach to application development, the IT organizations developed applications that were closely aligned with individual lines of business, which are often centered on a specific combination of product families, market segments, and geographic region.

There are many advantages to this "divide and conquer" approach. Application developers can concentrate on a specific set of business rules because the application's scope is limited to a well-defined aspect of the business. They can develop the application as a nearly self-contained system designed to meet the needs of the specific business community it serves. Because all the application's stakeholders have a homogeneous background, they can expend minimal time gaining consensus during the requirements and design sessions. The business sponsors and subject matter experts already have a fairly consistent view of how they expect the application to behave, and if interfaces with other applications can be kept to a minimum, the application can be isolated from the impact of changes occurring elsewhere in the application portfolio.

Account-oriented organizations usually incorporate the "divide and conquer" approach into their application architecture, and the approach is appropriate because these organizations' objectives are to ensure they have properly accounted for their product and service sales. However, this approach can prove to be a major impediment when those same organizations want to become more customer oriented. You don't need to know much to be able to send out a bill -- just enough of a name and address to get the mailing label right. If the statement or bill isn't returned as "no such addressee" and the bill is paid, you've got enough information to satisfy the billing department. But what about the marketing, sales, and servicing departments? Are their needs for customer information being met? Hardly!

To date, our application portfolios are driven by the billing departments, which have only minimal need for customer information. To make matters worse, the billing applications implemented the company's customer data as text strings that work well for mailing purposes but are difficult to use for analysis purposes. If the same customer has interactions with several different lines of business, his or her data will be recorded redundantly in each billing system. Most organizations did not mandate that the various billing applications use a single, unique identifier for each customer. Consequently, each application developer was free to devise his or her own approach to managing customer data. For the most part, this meant that the application didn't create a customer ID because the billing system still worked even if the same customer was represented multiple times within the enterprise's databases.

If your organization is truly committed to customer intimacy, it must develop an information technology architecture that can provide an integrated customer knowledge base. It must analyze each existing application to determine how much customer data it contains and how that data is formatted. Finally, it must develop strategies to migrate the customer data from these account-oriented applications into the knowledge base. You cannot achieve customer intimacy if the information about your customers is scattered across local application databases.

Business Processes

Your IT organization can deliver the best, most customer-centric applications available, but if the business processes that support the customer-facing activities are still account oriented, you won't achieve customer intimacy. In many organizations, customer service representatives (CSRs) are primarily order-takers who expect customers to know what they want. CSRs are usually rewarded on time-based quotas, such as number of telephone calls processed per hour or number of service calls made per day. Consequently, the staff is implicitly encouraged to complete each transaction as quickly as possible with the least amount of paperwork possible. Anyone who attends data warehouse conferences has heard the story about the insurance company that had a high percentage of broken leg claims. When it researched the phenomena, it found that the U.S. was not in the grips of some epidemic that caused people to fall down a lot; rather, "broken leg" was the default for the claim type field on the data entry screen. The claim type field was not used directly by the claims processing system, so the system accepted the claim with this incorrect data. The downstream processes that analyzed claims based on this data were producing incorrect results.

Customer intimacy programs require that the CSRs have the information they need readily available to satisfy their customers' requests. Furthermore, their managers must empower them to assess each situation individually and determine the best course of action to resolve any anomalies that may arise.

Customer intimacy also demands that the quality of the customer care provided be equally rewarded as the quantity of customers serviced.

Corporate Values

Organizations implement business processes so they can meet their corporate goals. They establish goals with their value systems in mind. An organization's values are manifested more through its behavior than its official "vision and values" statement. The published value statement may be "We value our customers and will provide exemplary service," but if the CSRs are measured solely on the number of calls they process without considering the correctness of the resultant orders, this organization is not ready to be intimate with its customers.

When an organization says it is going to become intimate with its customers, it should perform a "customer readiness assessment" to determine just how ready it is. Quite often, the words "customer intimacy" sound wonderful, but the speaker has no real idea what it means to become customer oriented. The first step is to determine exactly what the business means when it uses the word "customer." When you known this definition, you can assess the business infrastructure from the corporate culture, business processes, and information systems perspectives.

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